Tax season is here and your 2017 return is the last time (until 2026) to take advantage of certain deductions. If you missed the previous post on personal exemptions and the new tax law, you can find it here. Another thing that will be changing is the deductions you will be allowed to take each year. Below are just two examples of the recent changes you might see on your 2018 return.
State and Local Tax Deductions
Previous rules allowed filers to deduct the full amount of either: (1) their state income taxes or (2) their state and local taxes as well as (3) property taxes.
Under the new bill, all three are lumped together and the deduction is capped at $10,000.
For borrowers in areas with high taxes, not being able to fully write off these deductions could result in a higher tax bill.
For mortgages originated before December 15, 2017, filers can deduct interest paid on home loan balances of up to $1 million. This $1 million cap applied to the mortgage on a primary residence plus one additional home.
For mortgages originating after December 15, 2017, this cap drops to $750,000. However, beginning in 2026, the cap will revert to $1 million, no matter when the debt was incurred.
Additionally, under former rules, interest on home equity loans or lines of credit was tax-deductible. However, this deduction will no longer apply starting in 2018. This could make home equity loans a less attractive way to borrow for home improvement, college, debt consolidation or other purposes. This is not a permanent change – the home equity deduction will return in 2026.
If you are still struggling with how the new tax bill will affect you, Polston Tax can help you understand the changes and how best to use the new rules to benefit you. Call us today at 844-841-9857 or click here to schedule a free consultation.
Additional Readings
A recent article from the Washington Post cites data from 2019, where 1.3% of taxpayers earning one million to five million dollars were audited. Further, only 0.2% of those earning $25,000 to $50,000 were audited. You must understand this is not a personal attack when you receive an audit letter. The IRS has a computer...
In June 2023, the IRS began sending millions of CP14 notices to taxpayers countrywide. Those who receive these statements typically have many questions about what they mean and how to handle them. The Polston Tax Resolution & Accounting professionals are here with the answers you need. What Is an IRS CP14 Notice? An IRS CP14...
In 2022, Americans owe a whopping $120 billion in back taxes, according to the IRS. Now some people owe a year’s worth of taxes and can quickly get back on track. At the same time, others owe years and years’ worth of taxes and face severe consequences for their unpaid taxes. Have you been worried...
Receiving a letter from the IRS or the state can be intimidating, especially if you’re unsure what the notice is for or what to do next. Fortunately, many notices are nothing to worry about and are purely informative. Below, we take a look at everything you need to do — and what not to do...
The Employee Retention Tax Credit (ERC or ERTC) is a tax credit that the United States government introduced as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act. The ERC was meant to help businesses across the country that were feeling the negative impacts of the COVID-19 pandemic. Eligible companies are still able...